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While the national dialogue on health reform is focused on access, buyers are
primarily concerned with increasingly oppressive increases in health care costs.
This trend is particularly onerous for small and mid-sized employers. However, it is
a very little understood fact that there is substantial excess cost in the system that,
if eliminated, not only would not reduce care, but would actually improve it.

These include:
1.        Significant, modifiable risk factors among employees, coupled with
inappropriate and excessive use of the health system
2.        Enormous variability in the quality and efficiency of provider services, largely
unknown to both the employer and consumer communities.
3.        Uncontrolled, excessive capital investment.
4.        Programs being sold to buyers to control costs that, if providers of
documented quality and efficiency were to provide health services, would be
unnecessary.
5.        Costs currently being paid that, if there were true transparency in the system,
buyers might well choose to avoid.

There is a lot of discussion and gnashing of teeth about health costs, but little actual
effective movement. Current attempts to control health care costs have run their
course.   It should be clear by now that current players and proposed solutions are
not likely to evoke any significant change from the upward cost spiral. Current
health care stakeholders have a vested interest in the status quo; and reducing
revenue, as might well occur with some programs that reduce cost, is not a
welcome addition to their efforts. Piecemeal, gradual or incremental approaches
won’t work. Really fixing health care requires not today’s small, focused
initiatives; but an effectively organized group that will implement a new,
comprehensive, systemic strategy.

The Indiana Employers Quality Health Alliance is a business coalition dedicated to
improving the value of health services . After a research and planning process, the
Alliance has concluded that:
•        The health cost crisis can be addressed;
•        Emphasizing quality is an essential part of cost control along with improving
outcomes;
•        Competition can work, provided true functioning markets are created that
will allow it to work;
•        An organized, focused approach can achieve true cost constraint and
improved quality and outcomes; and
•        Such a systematic approach can be integrated into an appropriate financing
mechanism to improve access while minimizing excessive governmental
intervention.

Health care markets are unique and require outside involvement to function
effectively because:
•        Demand for health care is relatively inelastic,
•        Need is often immediate – precluding typical “shopping”,
•        Information is either lacking or unintelligible to average consumers

The Alliance approach calls for creation of neutral, statewide, not-for-profit entities
to:
1.        Establish and coordinate functioning health care markets,
2.        Provide sufficient data and information to manage all factors influencing
health care services and costs while assuring high quality, efficient care,
3.        Expand employee and dependent health maintenance and improvement,
4.        Reduce employee and dependent need and demand for health services,
5.        Identify and encourage the use of the highest quality, most cost effective
providers and efficient administrators,
6.        Eliminate unnecessary programmatic costs,
7.        Conduct group purchasing of required vendor services at highly discounted
rates, and
8.        Become an effective advocate for fundamental health finance reform and
appropriate community public health efforts.

To be successful in creating real health markets and implementing appropriate
initiatives will require an effective market coordinator, i.e., a neutral and objective
arbiter with no conflicts of interest, such as needing to fill beds, maintain market
share, or assure shareholder return. The purpose is not to compete with existing
health care stakeholders, but to produce real value and mutually beneficial change
by assuring checks and balances in the market that will foster competition and
reward progress toward buyers’ goals.

However, ultimate success will require sufficient leverage with the health care
community. This may be accomplished either by effective aggregation of
purchasers or through leadership from government at the Region, State or National
level. In Indiana, the Alliance is endeavoring to expand statewide, engaging small
and mid-sized employers having less than 3000 employees in communities across
Indiana, with a goal of representing altogether at least 50,000 new employees, in
addition to the 80,000 employees currently represented. This newly reorganized
Alliance would become the neutral, not-for-profit entity that will establish and
coordinate functioning health care markets throughout the State.

The market coordinator would seek to improve health, reduce health care
utilization, and promote quality while constraining costs by focusing on three
distinct areas:
1.        Encouraging member personal responsibility, supported with appropriate
benefits
2.        Value-based group purchasing, and
3.        Advocacy of fundamental finance reform

Detailed descriptions of these initiatives follow:
1.        Personal Responsibility and Supportive Benefits Structures – Finding ways
to engage individuals in reducing risk factors and assuming personal responsibility
is essential to reducing the need for, and cost of, health services. In this area, the
Alliance would assist member employers to develop a health-focused corporate
culture which, when coupled with appropriately supportive benefits structures, will
encourage employees and dependents to:
o        Accept personal responsibility for health and preventive care
o        Reduce demand (through health education, wellness and disease prevention)
o        Avoid unnecessary utilization, seeking medical intervention only when
appropriate,
o        Choose high quality, efficient providers, and
o        Work closely with their physicians to manage health and chronic disease
When good information is coupled with appropriately structured benefits (including
rewards and penalties) employees, dependents and covered retirees will change
their behavior. And that will lead to lower costs.

2.        Value-based Purchasing
It is important to recognize that cost relates only minimally to price and that discounts
rarely produce the anticipated control over cost. Non-price factors in cost include:
•        Risk factors – health status and behavior of employees
•        Inappropriate Utilization – Using the health system unnecessarily, or at an
inappropriate site
•        Physician Quality & Redundancy – Errors in diagnosis and treatment, or
duplication of interventions
•        Medical errors – Mistakes incur cost for correction, re-do, and complication
management
•        Unnecessary Control Programs – Profit centers of vendors, but unnecessary for
a well constituted “system”.
•        Excess Capital Investment – there is currently no effective check on redundant
facility construction or services
•        Unrecognized Charges - It is important to know where the money is actually
going.
•        Indirect Costs – Employer costs beyond group health costs.

Productive group purchasing should be collective and strategic, based on good data
focused on obtaining improved quality and efficiency, not just lower prices, and
should require total transparency, i.e., complete information on all costs, their
justification and results. The purchasing groups must represent sufficiently large
numbers of employees to provide effective bargaining leverage.

Buyers must realize that they will give up some autonomy in order to create an
effective bargaining position; but negotiating outside the pool will completely negate
the power of group purchasing.

Areas required for, or amenable to, effective group purchasing include:
a.        Data: Management of health programs developed by market coordinators
requires good data and information regarding employer experience, employee
behavior and provider performance.     The Alliance intends to establish a statewide
data warehouse for this purpose.
b.        Providers: Employees must be directed to high quality, efficient, price-
competitive providers. It is hard to get lay persons to understand the extent of
variability in these aspects of health care. The implications of this reality are truly
significant. Poor physician judgment and lower clinical quality of physicians and
institutions inevitably contribute to unnecessary service, less than optimal outcomes,
and excess cost.   But patients don’t know how to identify the better performers –
where, and under whose care, they are most likely to “get well”.   Therefore, an early
priority of a new statewide coalition should be to identify high performing providers,
including hospitals, physicians and other services. This would involve prospective
documentation of quality and efficiency coupled with total price transparency and
incentives for employees to choose only economical quality providers.
c.        Administration of a true health system is complex – There are multiple
accounts to manage; large volumes of data to accumulate, aggregate and analyze;
and sophisticated reports to produce. It is essential to any buyer that
•        Claims be administered efficiently,
•        Service levels be of the highest quality, and
•        Adequate, consistent data be provided to allow uniform and maximal feedback
to patients, buyers and providers
Health plans, insurance companies and other administrative suppliers must be held
accountable for meeting employer expectations and their standards for efficiency
and service.
d.        Vendor group purchasing:
For some vendors, group purchasing through a single autonomous group, either
through the Alliance – as has been accomplished by other employer coalitions – or
through the National Business Coalition on Health, may be a more effective way to
obtain services than individual small and mid-sized employers can achieve on their
own. Some coalitions have saved millions of dollars for their members by this
process. It is important to emphasize that, whether done by individual buyers or as a
group, value-based purchasing must be totally transparent and must consider
quality and efficiency, not just price.

It is important to recognize again that, while participating buyers will give up some
autonomy in order to establish an effective bargaining position, group purchasing
will only be effective if members choosing to participate in that specific group commit
to purchase the service through a single autonomous group.   Negotiating outside
the purchasing group will completely negate the power of group purchasing.
Some services amenable to effective group purchasing that could be evaluated, and
possibly group purchased from preferred vendors, include:

        Electronic enrollment and profiling,
        Laboratory
        Vision
        Pharmacy Benefits Management
        Third Party Administration
        Insurance and reinsurance

3. Finance Reform – Any discussion of health care and reform must address this
issue to be considered credible. Currently, the interests of employees, providers,
insurers, government and others are not in synch with one another, let alone with
those of the employer. If we are to develop a cost conscious, efficient system,
financing must be restructured. While this can, to a limited extent, be addressed by
buyers in their benefits structures, most changes in this area will require State or
Federal legislation. However, organized buyers can become a significant voice for
reform. While the Alliance currently has developed an approach to financing
characterized by integrated private and public purchasing pools (or exchanges),
appropriately structured to avoid the problems in recent pool experiences, it is
reasonable that a new, statewide organization should immediately create its own
task force to understand and define a program of finance reform that it can actively
support before State and Federal bodies.

Financial Impact:
The conservatively projected net financial impact of to buyers of this comprehensive
approach is estimated to be at least a 5 – 10 % reduction in health trend in each of
the first two years and a trend in single digits, approximating or less than general
inflation, in subsequent years. More important are the long term benefits of this
effort, such as improved care; better outcomes; enhanced employee health,
understanding, cooperation and satisfaction; lower indirect, medically-related costs
with increased productivity; as well as substantial reductions in group health costs.

CONCLUSION
1.        This multi-community, broad-based, systematic approach can create the
paradigm shift required to address the multiple issues or coverage, access, cost,
and quality.
2.        Neutral ownership, leadership and direction of a not-for-profit entity could
eliminate potential conflicts of interest existing in essentially all other efforts and
make this vision a reality.
3.        Success in Indiana could make Indiana a model for the United States and is
likely to result in similar efforts by numerous other coalitions across the country.

If you would like to receive more information or join this effort, contact:

Dr. E. H. Lamkin, President

Indiana Employers Quality Health Alliance

4145 Washington Blvd., Suite 300.

Indianapolis, IN 46205-2616

(317) 283-2780

Email: nlamki@sbcglobal.net

Statewide Recruitment